Huge Generosity on a Small Budget

Craig Donofrio — Break It Down

While we’d all like to be generous year-round, this time of year it can feel especially awful to be too cash-strapped to respond to every Salvation Army bell or worthy GoFundMe cause. But you don’t need to be as wealthy as Bill and Melinda Gates to match their philanthropic spirit. The key to charitable giving on a budget is breaking it down into small, financially manageable steps.

Step 1: Vet your charities

Before donating to any nonprofit, you should know where your money is going. While charities typically use some of their funds to cover overhead costs like salaries and supplies, the percentage of each donation going toward such expenses varies by organization. Charity Navigator, an organization that ranks charities, has a searchable database to help you figure out the organizations that excel at earmarking as many of your dollars as possible to services and programs.

Depending on which charity you choose and how you donate, you may also pay a small fee to donate. Many organizations rely on third-party vendors to process donations, and those vendors pass that fee on to you. Credit card giving programs, crowdfunding sites, and payment processors like PayPal and Square also deduct fees from your donation.

For example:

  • PayPal – 2.2 percent fee, plus 30 cents per transaction

  • Square – 2.75 percent per swipe, or 3.5 percent plus 15 cents per manually entered transaction

  • American Express Members Give Program – 2.25 percent fee per transaction

  • GoFundMe – 7.9 percent plus 30 cents per donation

  • YouCaring – 2.9 percent, plus 30 cents per credit card transaction.

Because of such common fees, Reuters recommends people give at least $25 to their charity of choice. Of course, you can dodge transaction charges altogether and give an in-person donation via money or check to a local organization. A smaller donation could serve a smaller local charity just as well, or better, than a larger organization.

Your local food bank is a great place to start. “We can turn 26 cents into a meal, and just $1 provides four meals for hungry men, women, and children,” says Janie Gianotsos, communications director at Food Bank of the Rockies in Denver. “Just checking between the couch cushions might feed a family of four.”

Step two: Give in installments

You don’t have to give your whole donation all at once. Certain organizations take monthly contributions, most of which are wholly or partially tax deductible. And installment giving can make budgeting easier.

“If you consider charity as part of your monthly expenses, it makes it much easier to afford giving even when you may not have as much as you’d like to give,” says Stephen Rischall, founding partner of 1080 Financial Group in Los Angeles.

If you go this route, make sure you understand how to cancel these recurring donations. Some organizations allow you to opt out online, while others may require a phone call. For example, PBS Passport, a way to donate to PBS that also gives you access to more PBS streaming programs, goes through your local participating station. You would need to check with your local station to see how to cancel or modify your membership.

Step three: Donate yourself

Philanthropy “has nothing to do with wealth and everything to do with helping your neighbor,” says Gena Rotstein, co-founder of Karma & Cents, a philanthropic-focused financial and legacy planning company in Calgary, Canada. “Volunteering is one of the most selfless acts you can do and it won’t drain your bank account.”

Many organizations need more than just money. For example, animal rescues typically need dog walkers, pup groomers, and loving people to wash very dirty laundry. Charitable meal delivery programs rely on volunteer drivers. Scores of educational organizations are in search of tutors and readers. And we can’t believe this is considered charity, but children’s hospitals sometimes need volunteers to snuggle lonely baby patients. A local organization may also kindly consider your professional services or talents: cooking or bartending for an event, helping with accounting and taxes, playing music at a group home, etc.

If you don’t have a lot of time or money, there are other things you could consider donating. Groups like  Pantene Beautiful Lengths, Locks of Love, and Wigs for Kids rely on donated hair to create wigs for cancer patients. You can also donate blood to a reputable blood bank near you. If it’s time to move or clean out your closet, weigh the merits of donating gently used items to one of several local nonprofit thrift stores. Some organizations will even take your old electronics or smartphones, or your car.

Step four: Cash in on those tax deductions

As of 2017, you can still offset the cost of giving to charity on your taxes, which could make it easier to give throughout the year, as long as you have an idea of what you might get back. Keep in mind that not everything is tax deductible. You can only deduct expenses from verified charitable organizations (typically classified as 501(c)(3), although some 501(c)(4) charities are eligible). Social crowdfunding platforms like GoFundMe and Kickstarter are not eligible. And when it comes to how much you can donate for tax cred, generally, you can deduct charitable contributions up to 50 percent of your adjusted gross income. If you’re writing off a donation of $250 or more, get a receipt stating the value of your donation. You’ll need it if you’re audited.

Donated items to verified organizations are also tax write-offs at their fair market value. If you donate and deduct the cost of an item worth at least $500, the IRS requires an appraisal letter with your tax return.

Even some volunteering can get you a tax boost. Volunteers can write off a few things, like parking fees, bus and transportation tickets, lodging, and tolls incurred while traveling. You can also write off your gas costs if you used your personal car during your service. And if you’ve got a volunteer T-shirt or uniform, the cost of buying it and keeping it clean are also a write-off.

The catch is that the charitable donation tax deduction works only if you’re not taking a standard deduction (which may double in the coming years under the currently proposed tax overhaul bill wending its way through Congress), so don’t assume your generosity will automatically be rewarded by the IRS. While it pays to be smart about the tax advantages, do keep perspective. Just because you might not end up writing it off doesn’t mean your gift won’t pay spiritual dividends well after giving season ends.